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In a further sign that we are beginning to win the argument for
lifting of Housing Revenue Account debt caps, the Treasury
Committee has published a unanimously agreed report on the 2017
Autumn Budget and supported ARCH calls for the Local Authority
Housing Revenue Account (HRA) borrowing cap to be removed to help
meet the government's target of 300,000 new homes per year.

In our joint submission with the NFA made to
the Treasury prior to the 2017 Autumn Budget ARCH called on the
Chancellor to empower Local authorities to build more homes by:

Giving councils back control of their housing assets and
revenue by committing to the principles of HRA self-financing for
council housing under the Localism Act 2011 which has the potential
to drive a real revival in public investment in council housing if
properly supported; and,

Lifting the HRA debt caps for new build purposes and relying
instead on prudential borrowing rules to enable councils to invest
in new homes and pay back the money from their rental income.

ARCH welcomed the Chancellor's announcement in
the Autumn Budget that councils would be able to bid for an
additional £1billion borrowing headroom available over 3 years from
2019 but ARCH argued that it did not meet our demands and now the
influential Treasury Committee in its examination of the Autumn
Budget has supported our call for removal of the HRA borrowing
cap.

In their Report, the Treasury Committee say:

"The decision in the Budget to raise the HRA borrowing cap by
£1billion is a positive step. However, in order to increase local
authority construction to levels sufficient to meet the
government's 300,000 target, the HRA borrowing cap should be
removed."

The report goes on to say:

"Raising the cap would have no material impact on the national
debt, but could result in a substantial increase in the supply of
housing, allowing local authorities to determine the level of
additional housing need in their area"

The Treasury Committee Report also criticises the government for
failing to clarify the bidding criteria for allocation of the
additional £1billion borrowing headroom saying:

"The bidding process proposed by Treasury to allocate the
£1billion of local authority HRA headroom may not direct resources
to areas of greatest housing need. The criteria for allocation are
currently unclear"and the report goes on to say that"The treasury
should establish clearly defined needs based criteria for
allocating the additional borrowing".This is something that ARCH
Chief Executive has already raised with officials at the Ministry
amid concerns that if the criteria is too tightly constrained and
conditions too onerous there is a danger that the bidding process
may be undersubscribed and the opportunity lost.

"The Chancellor pledged to 'fix the broken housing market', but
the Government is going to find it very difficult to meet this
ambition. The increase in the cap on borrowing for local
authorities to build homes is a step in the right direction, but it
doesn't go far enough.

The borrowing cap restricts the number of homes that local
authorities could deliver. To achieve the Government target of
300,000 new homes per year, the cap should be abolished. The
potential of local authorities to build should be unleashed."